Following the law allowing $14,000 to be gifted to anyone without tax consequences, why couldn't a 529 owner give this amount to each of several relatives or friends who in turn gift it to his 529 thus increasing the account very rapidly?

1)Because a gift with the expectation of a return gift won't be treated as a gift.2)Because the friend/relative could choose to keep the money.3)Because there are other ways to handle this. A husband and wife could give $28,000. They could also use 5yr gifting to give $140,000. Giving more doesn't mean that they will owe taxes.

As I read the rule, receiving full value or the expectation of receiving full value is required to invalidate the gift for tax purposes. However, the donor doesn't receive "full value" because if he removes the money from his 529 for other than educational expense he must pay a 10% penalty on it.

Good try, Caddie. If I make a $14,000 contribution to a 529 plan for your son, the IRS treats this as a $14,000 gift. (Also, the 10% penalty is only on gains and not the basis.) Sorry, but if you give me money and I'm supposed to give a gift of an equal amount, it won't be treated as a gift. Like I said, there are easier (and legitimate) ways to do this.